Option Investor
Archive
HAVING TROUBLE PRINTING?
Printer friendly version
Jeff Bailey : 11/22/2007 12:58:36 AM

e-mail question: ... Any significance of the $VIX showing declining tops for the past several days as the broad market trades lower?

Jeff's Reply ... Yes. A decline in the VIX.X equates to a greater number of put sellers/call buyers than there are put buyers/call sellers. It is THAT SIMPLE.

I'll try and look at both an SPY and SPX option chain, see what options are getting the action.

VIX.X has been "flip-flop" either side of its WEEKLY Pivot this week (26.55).

What we may want to look for is the STRIKE in the SPY/SPX that has been seeing OI increase. Should the level be violated, that could see the trade carry in the direction of the break.

Hey, I just happened to grab an SPY option montage this morning, as I was "benchmarking" OI as it related to my trade profile in the SPY yesterday. I'll post it in the MM this evening.

Here's the option montage of the SPY from earlier today at 12:19:23 PM EST (I'm in Denver, so it was "this morning" (CBOE Volume only) with OI as of Tuesday's close. Link

Check out the SPY UptickVol and DnTickVol at the top of th montage.

Now here is today's SPY Option Chain at the close, where I simply sort by CBOE Volume to get most active SPY options Link

Check out the UptickVol and DnTickVol by the close. Then see today's last hour of trade and PRICE action. (YM short! wink...)

Now here is today's SPX Option Chain at the close , where I sort by CBOE Volume to get most active Link

Note #1: at 12:19 PM EST, VIX.X was 26.95.

Note #2: I did go over to CBOE site and sure enough, 62,610 contracts were traded in the Dec. 1,000 Puts. What IMPACT might that have on the VIX? Is it meaningful? Prrrrrrobably not other than impact on the VIX.X. Still, taking a note. Market makers are a tricky bunch (been there, done that) and you can influence the VIX with that type of stuff. Sometimes you can influence market participants too! Think about the difference between 62,610 puts BOUGHT at the 1,450 strike vs. 1,000 strike. TWO entirely different reads, but same impact if upticked, or downticked. Right? Think of the RISK involved as it relates to WHERE the SPX is trading NOW, and at what STRIKE the trade was placed.

Note #3: ... Now to even BEGIN to answer the "any significance of the $VIX showing declining tops..." you'd BETTER have an idea what the Open Interest is doing (RISING, or FALLING).

RISING OI at a strike hints at a CONVICTION point. I've tried to teach traders to look at uptick/downtick. If major downtick, then SUBTRACT the day's average trade from the strike to ascertain a price equivalent. If major uptick, then ADD the day's average trade from the strike.

TODAY for instance and the SPX Dec 1,300 Puts (SXY-XT). Those are the ones I tend to observe most. The DnTickVol roughly 4:1 on the UpTickVol. Trader that is SELLING that put is saying "I'm a 1,300 buyer minus premium of $9.40, or 1,290.60." Now, if OI RISES at that strike, I've got a pretty good observation of some BULLISH conviction from 1,290.60-1,300.

Bottom line from my experience is we want to see where the SELLING is at in options, and where the OI is RISING. That's the CONVICTION, and can become the RISK levels.

And of course ... LOOK AT A CHART! SPX Link

And understand the RISK BPSPX Link

OI Technical Staff : 11/21/2007 9:59:59 PM

The Market Monitor has been archived. You may view it and any previous days here: Link

Disclaimer: Stocks discussed in the Market Monitor are for educational purposes only and any analysis is not meant to imply a recommendation for or against that stock. The analysts in this forum as on any other website are prohibited by the SEC from giving any specific advice to ANY individual trader. All information posted is for ALL readers and is not meant to be directed to any individual. Our analysts cannot answer any email questions regarding any specific stock. Please do not ask and please do not take offense if requests are denied.

Results posted in the Market Monitor are hypothetical and OIN does not claim that any reader achieved these exact results. Due to the lag time between research, writing, posting, uploading, reading and execution there will be differences between the actual signal given and the fill achieved by the reader. Fills may be better or worse but in most cases they will be different. The writers will make every effort to give advance notice of intended signals and indicate potential price targets. Your individual results may vary depending on your activity level and aggressiveness. This forum is intended as an education service only. Trading involves risk and should not be attempted by anyone not ready to accept this risk. By acting on any signal in this forum you agree and personally accept this risk.

Linda Piazza : 11/21/2007 6:24:37 PM

Sorry I missed the discussion about how many years we've been wishing subscribers a Happy Thanksgiving, but I went to start cooking as soon as the markets closed. I think October might have marked the anniversary of my fifth year with OIN. Or is it sixth? At any rate, Jeff, I was reading your reports far before I started writing for OIN, so you're ahead of me on the years writing for OIN, although I'm way ahead of you on years of age!

Jeff Bailey : 11/21/2007 5:04:20 PM

Current OPEN MM Profiles that I've made and Watch List found at this Link

Jeff Bailey : 11/21/2007 4:53:42 PM

I lost track Linda. I think it is 7, or 8 years.

Jeff Bailey : 11/21/2007 4:29:58 PM

That should get us where we're going this weekend.

Have a safe Thanksgiving!

Jeff Bailey : 11/21/2007 4:28:38 PM

Covering rest of YM short here at 12,817 in personal account. I'm a realist.

Jim Brown : 11/21/2007 4:26:57 PM

Jane, it has been 10 years for me. This Thanksgiving is the 10th anniversary of Option Investor. I started it in November and our first newsletter went out on the Sunday after Thanksgiving in 1997.

Jane Fox : 11/21/2007 4:14:27 PM

Happy Thanksgiving to each and all. Heh Jeff, Jim and Linda how many times have the three of us wished our subscribers a Happy Thanksgiving?

Linda Piazza : 11/21/2007 4:08:22 PM

Remember the chart linked to my 10:47:02 post this morning, the one showing how the SPX has behaved relative to the weekly 72-ema since the middle of 2003? So far, with only one trading day left, the SPX remains below that moving average that has supported it on weekly closes (with a couple of minor violations) since 2003.

Jim Brown : 11/21/2007 4:02:45 PM

No short covering rally in sight. I told myself this morning I was not going to trade the ER because of the low volume volatility. I could not resist the urge and I ended up contributing about 6 point to somebody else's profit. Somebody slap me if I do it again on Friday.

Jeff Bailey : 11/21/2007 4:02:18 PM

Or is it potatoe?

Jeff Bailey : 11/21/2007 4:00:35 PM

12,813 ... put on the sweet potato

Jim Brown : 11/21/2007 3:59:52 PM

Woosh! So much for defending 12,845

Jeff Bailey : 11/21/2007 3:59:24 PM

YM 12,826 ...

Jeff Bailey : 11/21/2007 3:58:26 PM

If it goes overlap at 12,750, I'll say "you're dreaming!"

Jane Fox : 11/21/2007 3:58:15 PM

This has been an almost perfect Head and shoulders pattern. It has not quite made to full profit - yet. Link

Jeff Bailey : 11/21/2007 3:57:24 PM

DAILY 19.1% marks the morning lows.

Jeff Bailey : 11/21/2007 3:57:00 PM

YM 12,857

Jim Brown : 11/21/2007 3:52:49 PM

Looks like the bulls are trying to defend that August closing low but the sellers are really leaning on them. Definitely not the normal bullish turkey trot into Thanksgiving.

Keene Little : 11/21/2007 3:50:14 PM

I'm heading out early today so I'll be back on Friday to see whether or not the bulls can pull something together here. Right now I'd have to say the trend and wave pattern are against them. I hope everyone has a great weekend and be sure to enjoy family and friends. We have a lot to be thankful for, even if it's not the current market (wink). Drive safe and watch out for the nuts on the road, especially if they're suffering a tryptophanic coma while attemting to operate their vehicle.

Jeff Bailey : 11/21/2007 3:45:53 PM

YM 12,876 ... 80.9% dynamic

Jeff Bailey : 11/21/2007 3:45:33 PM

YM 12,872

Jeff Bailey : 11/21/2007 3:45:24 PM

YM 12,869

Linda Piazza : 11/21/2007 3:45:08 PM

The SPX has potential support at 1420.53 on 15-minute closes. If this support should hold on 15-minute closes and the SPX should spring up from that, that's again showing Keltner-style bullish divergence, as happened earlier. However, as was pointed out earlier, such divergences tell you that you need to make a plan to deal with a bounce, if it comes along, but they don't promise bounces.

Jeff Bailey : 11/21/2007 3:45:06 PM

YM short cover alert! 12,871

Jim Brown : 11/21/2007 3:42:49 PM

I think you got it right Jeff. Definitely turning negative across all the indexes.

Jim Brown : 11/21/2007 3:41:44 PM

If we get a Dow close under the August closing low of 12,845.78 that sets up a Dow Theory sell signal.

Jeff Bailey : 11/21/2007 3:41:15 PM

YM short finger on the button alert! ... be ready to cover on moments notice.

Jeff Bailey : 11/21/2007 3:40:18 PM

YM short entry alert! ... 12,897

Jeff Bailey : 11/21/2007 3:39:24 PM

Couldn't get it typed in time. Leave as a setup to short YM at 12,897.

Jeff Bailey : 11/21/2007 3:38:27 PM

YM short alert! ... here at 12,897. Stop goes 12,910. Target 12,860.

Jeff Bailey : 11/21/2007 3:34:37 PM

"Bad tick" to $73.00 for the IWM.

IWM $74.02 -1.31% ...

Linda Piazza : 11/21/2007 3:28:13 PM

And . . . the SPX no longer finds support on 15-minute closes at the 9-ema. It's a mistake to rely too heavily on technical analysis on a low-volume holiday afternoon.

Jim Brown : 11/21/2007 3:28:09 PM

I bought that last dip on the ER to 744 on expectations we might get a short covering rally into the close. Probably only wishful thinking on my part with time expiring fast. Recently it has been selling into the close so I am bucking the trend here.

Keene Little : 11/21/2007 3:25:35 PM

The update to the NDX 60-min chart shows a continuation of the very bearish wave pattern that I've been showing as the pink wave count on the charts. Today's bounce fits as yet another smaller degree 2nd wave correction. This wave count points to a waterfall decline about to hit the market. There is going to be some ugly selling straight ahead of the pink wave count is correct. A break to a new low (below 196) would set it off. Until that happens there is still the possibility for a Friday rally and a push back up (dark red). Link

Jeff Bailey : 11/21/2007 3:22:40 PM

NYSE NH/NL 25:511 ... not much change since last update.

Jeff Bailey : 11/21/2007 3:21:28 PM

NYSE A/D 957:2,312

Jeff Bailey : 11/21/2007 3:21:13 PM

TRIN 1.48 ... session low has been ... 1.04

Jeff Bailey : 11/21/2007 3:19:18 PM

"Wild" action in the YM last 20-minutes.

Keene Little : 11/21/2007 3:17:11 PM

The techs have been stronger today and NDX made it back up to a broken uptrend line from last week and has pulled back since. It's looking like some selling is starting to kick in again. Tech bullishness alone is not going to lift this market and I continue to see a bearish setup for at least lower lows from here. Link

Jeff Bailey : 11/21/2007 3:16:27 PM

Unusually heavy volume in the QQQQ today considering day before a holiday.

Pushing 151 M so far.

Buyers continue to stand their ground at still rising 150-day SMA.

Jeff Bailey : 11/21/2007 2:55:18 PM

Massey Energy (MEE) $30.25 +1.57% ...

Jeff Bailey : 11/21/2007 2:54:50 PM

Consol Energy (CNX) $54.50 -0.09% ...

Jeff Bailey : 11/21/2007 2:54:28 PM

Peabody Energy (BTU) $51.86 +0.56% ...

Linda Piazza : 11/21/2007 2:53:42 PM

I imagine that some of you might be taking off early to go out of town today, so I wanted to wish you an early Happy Thanksgiving. I'll still be here, although I'm trying not to comment too much on action that's likely occurring on low volume and likely not to amenable to technical analysis.

Jeff Bailey : 11/21/2007 2:53:13 PM

Arch Coal (ACI) $35.62 -0.19% ...

Jeff Bailey : 11/21/2007 2:52:23 PM

Arkansas Regulators OK Plan For $1.3B Coal-Fired Power Plant

Jane Fox : 11/21/2007 2:47:56 PM

And here is the US$ and Gold. Link

Jane Fox : 11/21/2007 2:45:48 PM

Crude and Gold Link

Jane Fox : 11/21/2007 2:43:17 PM

. . . and the DAX and the DOW. Link

Jane Fox : 11/21/2007 2:39:19 PM

Here is the $/YEN and the SPX. Link

Keene Little : 11/21/2007 2:38:31 PM

The downtrend line for SPX is now down to about 1437 and about 12980 for the DOW, both of which would be minor new highs for toay's bounce. Starting to think that's where prices will be parked for the day. That would leave both sides guessing what's next.

Jane Fox : 11/21/2007 2:35:44 PM

This also fits with how the VIX has not been "working" intraday of late and I have not been able to use it as a reliable internal.

Linda Piazza : 11/21/2007 2:34:37 PM

The SPX has been holding as support on 15-minute closes over the last hour, but only tentatively. Bulls want to see a stronger drive into the close.

Jane Fox : 11/21/2007 2:34:07 PM

Any significance of the $VIX showing declining tops for the past several days as the broad market trades lower?

Very good question. Here is a daily chart of the vix (magenta) with the SPX (black) that shows how these two generally move opposite to one another which fits with my intraday observations. But take a look at how the SPX has been moving down as the VIX is as well. This is called a divergence and should but the bears on notice. Link

Keene Little : 11/21/2007 2:26:40 PM

The current bounce is still looking corrective and indicates lower lows still. I wouldn't be surprised at this point to see selling into the close (or just go out flat from here).

Tab Gilles : 11/21/2007 2:11:29 PM

Weekly EIA Report Link

Linda Piazza : 11/21/2007 1:56:12 PM

The USDJPY still moves sideways below 109.00. It's at 108.48 as I type. No prediction of next equity direction is offered here, although I guess it could be considered an improvement to see it steadying.

Linda Piazza : 11/21/2007 1:46:51 PM

Nothing definitive going on right now. The 15-minute 9-ema is flattening the way it often does during the lunchtime lull. Prices are doing so again, too. This is a typical stop-running time of day, but I don't see evidence of it yet.

Jeff Bailey : 11/21/2007 1:45:18 PM

"Wild" action so far today in Pacholder High Yield (PHF) $8.50 +2.40% ...

Keene Little : 11/21/2007 1:30:00 PM

The downtrend line for SPX from last week's high is currently near 1440 so if SPX continues to chop its way higher today (this is supposed to be a bullish day, right?) then watch for resistance at its downtrend. But at this point, with a corrective bounce it's possible that's it for the bounce before heading lower again.

Keene Little : 11/21/2007 1:27:25 PM

Back to see what looks like a 3-wave bounce off this morning's low and now a turn back down. This continues to look bearish for lower lows to come.

Jeff Bailey : 11/21/2007 1:25:08 PM

General Motors (GM) $27.32 +3.91% ...

Jeff Bailey : 11/21/2007 1:24:30 PM

GMAC Exploring Partial ResCap Sale

DJ- GMAC Financial Services and its troubled home-lending arm, Residential Capital LLC, or ResCap, have hired advisors to explore the sale of certain parts of ResCap's operations.

Among possible transactions under consideration is GMAC acquiring a large non-U.S. mortgage-lending institution and merging ResCap's local mortgage business with the acquired institution, the companies said.

ResCap also said it launched a cash tender offer for up to $750 million of its debt securities. The offer will expire at midnight on Dec. 19. The debt buyback is to ensure that ResCap complies with its debt covenants, the companies said. They added that GMAC management intends to recommend a capital infusion to ResCap.

"The purchase of the notes in this tender offer at a discount and the retirement of the notes will increase ResCap's income" in the fourth quarter, the companies said.

ResCap, a once hugely profitable mortgage operation partly owned by General Motors Corp. (GM) through its 49% stake in GMAC, reported a big loss for the third quarter. Investors are now searching for the bottom at ResCap, trading the unit's debt securities at levels usually associated with a company that could soon seek bankruptcy-court protection. GMAC and ResCap have indicated no such plan. Last week, GMAC said it will bring in a new chief financial officer, and executives say ResCap is working to reduce its payroll and its lending operations. Because of ResCap's exposure to subprime loans, GM was forced to inject $1 billion of equity into GMAC during the first quarter, and it may have to put up yet more cash.

Linda Piazza : 11/21/2007 1:19:32 PM

So far at least the SPX and OEX both hold above their 15-minute 9-ema's on 15-minute closes, but only tentatively so far.

Jeff Bailey : 11/21/2007 1:07:22 PM

Current OPEN MM Profiles that I've made and Watch List found at this Link

XLF Watch List section was VERY red this morning.

Jeff Bailey : 11/21/2007 1:03:59 PM

Bank bounce give lift to majors

Linda Piazza : 11/21/2007 12:57:58 PM

The OEX has also produced its first 15-minute close above its 9-ema on that chart, with that now at 667.83. The OEX is testing resistance now near 669.60 with next resistance at 674.30, at the 120-ema that's been serving as resistance on 15-minute closes over the last couple of days.

Jeff Bailey : 11/21/2007 12:57:05 PM

JPM $41.68 +0.12% ... inches green.

Linda Piazza : 11/21/2007 12:56:51 PM

The first SPX close today above the 15-minute 9-ema, with that at 1425.59 currently. Nearby resistance at 1431.67 on 15-minute closes and then at 1442.79, at the 120-ema that's been stopping SPX advances over the last couple of days.

Jeff Bailey : 11/21/2007 12:55:30 PM

SPY $143.02 -1.12% ... battles WEEKLY S1 ($143.23)

Jeff Bailey : 11/21/2007 12:53:45 PM

SPG $88.97 ... no unchanged after morning low of $86.04.

Jeff Bailey : 11/21/2007 12:52:52 PM

BAC $42.91 +0.32% ... edges green.

Jeff Bailey : 11/21/2007 12:40:09 PM

USB $31.05 +0.22% ... inches green.

Jeff Bailey : 11/21/2007 12:39:54 PM

Wachovia (WB) $38.95 +1.37% ... "busts a move" after hovering at unchanged.

Jeff Bailey : 11/21/2007 12:38:36 PM

Yesterday's actual RUT NH/NL was 5:247 ... DAILY ratio was 2.0%, 5-day ratio was 8.0% and 10-day ratio was 9.4%.

Jeff Bailey : 11/21/2007 12:37:23 PM

So... eyeball a RUSSELL NH/NL with both NYSE and NASDAQ!

Jeff Bailey : 11/21/2007 12:36:54 PM

NASDAQ NH/NL 35:282 ... DAILY ratio 11.0%.

Jeff Bailey : 11/21/2007 12:35:44 PM

TRINQ 1.97

Jeff Bailey : 11/21/2007 12:35:36 PM

NASDAQ A/D 812:2049

Jeff Bailey : 11/21/2007 12:35:10 PM

What about our 4 and 5-lettered friends. Help out you Russell traders.

Jeff Bailey : 11/21/2007 12:34:36 PM

NYSE NH/NL 25/475 ... DAILY ratio 5.0%.

Jeff Bailey : 11/21/2007 12:33:04 PM

TRIN 1.93

Jeff Bailey : 11/21/2007 12:32:54 PM

NYSE A/D 735:2,490

Jim Brown : 11/21/2007 12:32:49 PM

I am still short crude from the morning spike. I am hoping enough traders want to take profits before the holidays to knock crude back to about $96.

Linda Piazza : 11/21/2007 12:30:23 PM

Remember that the bond market closes early today, at 2:00.

Jim Brown : 11/21/2007 12:22:35 PM

That dip back to 743 took me out for a breakeven on the ER. With volume evaporating I am not going to try any more today. Trading in a zero volume market is dangerous.

Linda Piazza : 11/21/2007 12:22:22 PM

The USDJPY has been going sideways for several hours, so it's not telling us much about direction on equities. The TRAN is above its 15-minute 9-ema, but hasn't yet broken convincingly above it, so it's still essentially in testing mode.

Linda Piazza : 11/21/2007 12:10:58 PM

For the OEX, the 15-minute 9-ema is at about 667. Bulls want to see the OEX forming 15-minute closes above that average.

Jeff Bailey : 11/21/2007 12:03:35 PM

EIA: Weekly Nat. Gas Storage Table Link ... buld of 4 Bcf.

Jim Brown : 11/21/2007 12:02:39 PM

My ER long over 743 is struggling at 745 and that resistance from 745-747 could be tough to cross. I would put your stop at breakeven at 743 and let's see what will happen. All the indexes have stalled on their rebound and volume has died. Volume is a weapon of the bulls and it looks like they ran out of ammunition.

45 of the last 55 years the day before and the day after Thanksgiving (combined) have been positive. We are going to have an uphill battle to do it again in 2007.

Linda Piazza : 11/21/2007 12:01:56 PM

The SPX is testing the 15-minute 9-ema, with that average now at about 1424. Bulls would like for the SPX to begin producing 15-minute closes above that average to show a short-term improvement in tenor. Yesterday afternoon's "short-term improvement in tenor" was short term indeed, lasting for only the last 45 minutes of trading before this average again became resistance on 15-minute closes today. Be forewarned that possible low volume this afternoon as traders leave their desks could produce strange moves that have little to do with what technical analysis is showing.

Jeff Bailey : 11/21/2007 11:59:27 AM

Seeing 1.2 million barrel build in Cushing, OK terminal. First substantial build since the 1.9 million during the week ended 8/31.

Keene Little : 11/21/2007 11:38:29 AM

I've got to get some things done before traveling later today so I'm stepping away for about an hour or so. I'll be back after lunch.

Jeff Bailey : 11/21/2007 11:38:09 AM

US Oil Fund (USO) $76.48 -1.11% ... 30-minutes ago was trading $76.65.

Jeff Bailey : 11/21/2007 11:36:55 AM

US Dollar Index (DXY) alert! 75.18 -0.02% (30-minute delayed) ... challenges its 10:30 AM EST EIA benchmark high.

Jeff Bailey : 11/21/2007 11:35:06 AM

Brazilian Bovespa ($BVSP) 500-point box chart Link

Jeff Bailey : 11/21/2007 11:34:05 AM

Brazil Stocks Fall Below 60,000

DJ- Brazilian shares extended their losses Wednesday afternoon, tracking deepening declines on Wall Street.

The benchmark Ibovespa stocks index fell 3.86% to 59,930 points at 1601 GMT, from Monday's close at 62,336 points. The index had opened only slightly lower Wednesday at 62,335 points, then fell about 2% amid worries about the U.S. economy and rising oil prices and lost even more ground as U.S. stocks fell.

The Bovespa stock market was closed Tuesday due to a local holiday in Sao Paulo and Rio de Janeiro, Brazil's biggest market places.

U.S. stocks slid in early trading, with investors reacting to a tumble in stocks overseas, continuing weakness for the dollar against most of its major rivals, and worries that oil prices may climb beyond the psychologically important barrier of $100 a barrel.

The Dow Jones Industrial Average was down 1.43% to 12,824,05 points at 11:03 a.m. EST.

Oil futures for January delivery rose $0.17 to $98.20 at the Nymex.

Brazilian bonds also felt the pressure, with the Global 2040 down 1 to 133 bid. Brazil's risk premium on JPMorgan's EMBIGD was 13 basis points wider at 234 basis points over Treasurys.

Investors in Brazil were concerned about the health of the U.S. economy after the release Tuesday of the minutes of the Oct. 30-31 Federal Open Market Committee meeting.

The Fed, in its minutes, expressed extensive concerns about the economy's vulnerabilities and cut its estimate for U.S. economic growth in 2008. A possible recession in the world's largest economy would hurt Brazilian exporters.

Linda Piazza : 11/21/2007 11:33:47 AM

So far, the SPX has maintained its support on 15-minute closes, with that support now risen to 1416.55. The SPX did pierce this supporting line and then did close 15-minute periods above it and rise from it, so the support test showed the Keltner-style bullish divergence that I mentioned as a possibility in my 10:35:42 post. Remember that bullish divergences don't prove that prices are going to rise: they only suggest that plans need to be put in place if they do, that a rise becomes a possibility. Markets are jittery, as all of us have noted.

Keene Little : 11/21/2007 11:33:22 AM

The SPX daily chart, updated here from the one in last night's Market Wrap, shows another reason why support could be found in the 1413 area--the long term uptrend line from March 2003. At that point, and as shown with the pink wave count, a 3-wave move down from October could be counted as complete. Link

Whether we get a consolidation above the trend line or a stronger bounce into the end of the year (or drop like a stone through the trend line) is unknown but I think it would be a good time to lighten up on any short plays (maybe even try the long side) and wait to see what the next move will be. But first we need to see if SPX gets down there (another short covering rally seems to be in progress).

Jim Brown : 11/21/2007 11:28:18 AM

It is very possible that we are going to see a rebound here with the Dow at the August lows. A bounce here would be a successful retest. I am looking to go long the Russell futures if we move back over 743.

Jane Fox : 11/21/2007 11:27:05 AM

Its looking like the market wants to try and rally and that lowering the stop was good choice.

Keene Little : 11/21/2007 11:22:13 AM

This SPX 30-min chart shows the parallel down-channel for price action since last week's high. The bottom of the channel is currently near 1413 so there's still some downside potential before support could be found today. If this market turns more bearish and price drops below the channel then we'll know that we're likely starting to unwind the EW count to the downside with some strong selling to follow. But the bullish divergences on the chart continue to warn bears not to get complacent here. Link

Jane Fox : 11/21/2007 11:16:20 AM

Dang it stopped at 12891. I wonder if I lowered that stop too tight?

Jeff Bailey : 11/21/2007 11:14:44 AM

EIA: Weekly Gross Inputs, Crude Oil Inputs, Ref. Op. Capacity, % Utilization and #Days Supply table at this Link

Jane Fox : 11/21/2007 11:11:28 AM

I am very relived to see the VIX/S&P futures (ES) relationship back on track. Notice where ES made a new daily high but the VIX did not confirm it and it has been a downward slide every since. Link

Jane Fox : 11/21/2007 11:10:50 AM

Miserable market to trade today. :(

Jane Fox : 11/21/2007 11:10:34 AM

Lower stop to 12891.

Jane Fox : 11/21/2007 11:07:53 AM

I will keep inching the stop down and eventually it will be at breakeven. This dance you do with where to put your stop is the "art" of trading and can be quite difficult and very frustrating.

Jane Fox : 11/21/2007 11:03:37 AM

Lower stop to 12906.

Jane Fox : 11/21/2007 10:56:44 AM

Lower stop on the short from 12879 to 12921.

Jeff Bailey : 11/21/2007 10:56:43 AM

SPX 1,417.60 -1.53% ...

Jeff Bailey : 11/21/2007 10:56:13 AM

SPY $141.93 -1.84% ... "O gets the square"

Linda Piazza : 11/21/2007 10:47:02 AM

The SPX is this week testing a level that I consider important, the weekly 72-ema. The SPX first climbed back above this moving average in June 2003, and other than some minor violations on weekly closes, this moving average has held on weekly closes since June 2003. Here's a chart, with the 200-sma the aqua-colored moving average being violated this week: Link

Keene Little : 11/21/2007 10:41:25 AM

The DOW and SPX are about to test yesterday's lows. I'd be surprised if they hold. The price pattern remains bearish but could change to at least short term bullish if this morning's highs near 10:00 AM are exceeded.

Linda Piazza : 11/21/2007 10:36:28 AM

When I mentioned "propping up" in my 10:35:42 post, I didn't mean necessarily anything conspiratorial. That propping up can come from short-term accumulation.

Jane Fox : 11/21/2007 10:36:28 AM

A trade you miss that is a loser is just as good as one you win.

Jane Fox : 11/21/2007 10:36:10 AM

Stop on the short from 12879 is 12941 and target is 12818.

Linda Piazza : 11/21/2007 10:35:42 AM

SPX target is now 1412.99-1419 on 15-minute closes. That's a big range, I know, but several support lines converge in that area. Like on the OEX, there's been a sort of hesitancy to reach down toward the lower support until now, so there's some evidence of some propping up of the markets. Here's something to watch if the SPX does continue dropping: the Keltner version of bullish divergence with yesterday's low would be found if the SPX were to pierce the 1418 zone, maybe approaching 1413, but then close back above 1418 by the end of the 15-minute period.

Jeff Bailey : 11/21/2007 10:34:49 AM

DIG $102.29 -1.04% ...

Jeff Bailey : 11/21/2007 10:34:34 AM

DUG $42.68 +1.66% ...

Jane Fox : 11/21/2007 10:33:14 AM

Well it was just as well we didn't get into that long position. I now see a short at 12879.

Jeff Bailey : 11/21/2007 10:33:00 AM

EIA: Weekly Crude Oil Stockpiles down 1.1 million barrels.

Jeff Bailey : 11/21/2007 10:32:20 AM

US Oil Fund (USO) $77.30 -0.05% ... jumps from $76.50 on headline numbers.

Linda Piazza : 11/21/2007 10:26:08 AM

Against that background for the OEX, let's look at the 15-minute chart. The OEX has so far this morning been finding resistance on 15-minute closes at the 9-ema, which is now at 669.74. Until and unless the OEX begins producing 15-minute closes above that 9-ema, it's set a downside target of about 664.85. (These lines are dynamic and move a little as the OEX does, so the target might be a little lower or higher after the OEX moves). Further potential support exists at 663.32 and 660.06 on 15-minute closes. So far, although that 9-ema resistance has held, the OEX has resisted falling toward its target, so that might warn bears to be a little cautious about their expectations. Prices seemed supported a bit, at least so far.

Linda Piazza : 11/21/2007 10:23:06 AM

For all you OEX traders out there, the daily Keltner chart suggests this outlook: Potential support exists at 659.97 on daily closes. However, until and unless the OEX can begin producing daily closes above about 680.40, it maintains a downside target of about 630.50. This is a potential target only, and a possible intermediate-term bounce could occur once that support near 660 is hit. If that bounce takes the OEX above that 680.40 level and maintains that level on daily closes, the downside target is erased. Not all downside targets are hit anyway, but this gives a basis upon which to study the OEX.

Jane Fox : 11/21/2007 10:22:14 AM

Overnight highs were 13041 so I am not requiring this trade to break to a new daily high.

Jane Fox : 11/21/2007 10:21:24 AM

I will take YM long at 12968 with a stop at 12897. Target will be 13039.

Jeff Bailey : 11/21/2007 10:18:38 AM

MBA's Weekly Application Survey found at this Link

Jeff Bailey : 11/21/2007 10:15:04 AM

December Copper (hg07z) $2.91 -3.96% ... undercuts yesterday's lows. Has retraced 61.8% of its 02/02/07 low settle ($2.38) to recent 10/03/07 settlement ($3.77)

Jane Fox : 11/21/2007 10:06:29 AM

WASHINGTON (MarketWatch) -- Consumer sentiment fell in November from the prior month, according to a monthly survey released Wednesday and the University of Michigan. The November consumer sentiment index was 76.1, compared with 80.9 reached in October. November's level was revised up from an earlier estimate of 75.0, which was the lowest reading since October 2005. Wall Street economists had expected sentiment to hit 74.5.

Jane Fox : 11/21/2007 10:05:13 AM

UMich Nov. consumer sentiment above 74.5 forecast

UMich Nov. consumer sentiment 76.1 vs 80.9 in Oct

Jeff Bailey : 11/21/2007 10:04:56 AM

DJ Update BOE Nov Minutes: MPC Voted 7-2 To Hold Rates At 5.75%

Jane Fox : 11/21/2007 10:04:33 AM

There are no bullish divergences telling me the bulls are lurking so any bounces has a higher probably of being a reactionary bounce and not make a higher high. Link

Jeff Bailey : 11/21/2007 10:04:03 AM

US Conf. Board: Oct. Coincident Index Unchanged

Jeff Bailey : 11/21/2007 10:03:41 AM

US Conf. Board: Oct Lagging Index +0.3%

Jane Fox : 11/21/2007 10:02:12 AM

WASHINGTON (MarketWatch) -- Slower growth for the economy may be on the horizon, continuing after the holidays, the Conference Board said Wednesday, reporting that a gauge of future economic growth fell 0.5% in October. Only three of the 10 leading economic indicators rose in October, with the largest positive contribution from stock prices. Building permits were the largest negative contributor. "Business confidence could edge lower, with unrelenting concerns about price increases not keeping up with wage pressures," said Ken Goldstein, labor economist at the Conference Board. "At the same time, consumers worry about wages not keeping up with price increases."

Jeff Bailey : 11/21/2007 10:03:14 AM

US Conf. Board: Oct. Leading Index -0.05%

DJ- An index intended to show the economy's future direction fell by 0.5% in October, according to preliminary estimates by the Conference Board.

The Conference Board, a private research group, said Wednesday that its composite index of leading indicators fell to 136.9 in October after a revised 0.1% increase in September.

The October decrease in the leading index was greater than the expected 0.3% decline forecast in a Dow Jones Newswires survey.

The index was equal to 100 in 1996.

Jeff Bailey : 11/21/2007 10:00:42 AM

GlaxoSmith Kline To Buy Reliant Pharma For $1.65B

GSK $48.19 -0.04% ...

ALKS $13.52 +5.87% ... stands to gain up to $174 million. Owns stake in privately held Reliant.

Keene Little : 11/21/2007 10:00:30 AM

Keep in mind that the next two days could be a little whippier than most. I would use crisp setups rather than taking a stab at a trade. With 50 to 100-point swings in the DOW it's real easy to get chopped up in this market.

Linda Piazza : 11/21/2007 9:55:59 AM

The Fed has announced two more repos since the last report, so the repos now total $37.000 billion against maturing repos in the amount of $34.250 billion, so that there's a net add of $2.750 billion.

Jane Fox : 11/21/2007 9:53:30 AM

I have noticed the VIX and S&P futures relationship becoming unraveled of late. This is extremely distressing for me because I rely on the VIX a great deal.

Linda Piazza : 11/21/2007 9:51:35 AM

The USDJPY is now at 108.50, trying to maintain tentative support at 108.31 on 15-minute closes. Well, the USDJPY isn't "trying," but you know what I mean.

Linda Piazza : 11/21/2007 9:49:53 AM

Until and unless the SPX begins closing 15-minute periods back above the 9-ema, now at 1430.57, it maintains a potential downside target of 1415.17-1419.10 on 15-minute closes.

Jane Fox : 11/21/2007 9:46:20 AM

AD line is a bearish -1847.

Keene Little : 11/21/2007 9:46:12 AM

Yesterday's late-day bounce has left a 3-wave correction to the decline. Just another one of many bear market short covering rallies with no follow through. Get used to it. The trouble this morning, as far as entering a short position, is not knowing how high a short covering spike could bounce the market. But so far this market belongs to the bears and the bulls will need to rally this above yesterday afternoon's high before the price pattern turns potentially bullish. In the meantime look to short the bounces.

Jeff Bailey : 11/21/2007 9:44:01 AM

Companhia Vale do Rio Doce (RIO) $32.41 -3.65% ...

Jeff Bailey : 11/21/2007 9:43:09 AM

BHP Billiton (BHP) $69.60 -4.27% ... #6 most active.

Linda Piazza : 11/21/2007 9:42:45 AM

The TRAN has just dropped below yesterday's low.

Jeff Bailey : 11/21/2007 9:41:40 AM

10-year yield ($TNX.X) down 4.9 bp at 4.005%.

Jeff Bailey : 11/21/2007 9:41:15 AM

Biiiig bid for Treasuries again today. 5-year down 15 bp at 3.345% looks defensive.

Linda Piazza : 11/21/2007 9:41:12 AM

Now that we have the background against which I'm examining the SPX, let's look at a shorter-term outlook, that shown on the 15-minute chart. It shows potential support from 1415.63-1419.31 on 15-minute closes. It's actually testing support at 1431.28 on 15-minute closes this first 15-minute period, but it's going to have to do some bouncing in these next few minutes to maintain that support on a close, so I'm looking at lower support. Bears need to consider how they'll treat a test of the 1415-1419 zone, if it's tested.

Linda Piazza : 11/21/2007 9:38:17 AM

My daily Keltner chart shows this setup for the SPX: Potential support on a daily close at 1414.41. However, it also predicts that unless the SPX can begin producing daily closes above the 9-ema, now at about 1456, it maintains a downside target at about 1350. That's the background against which I'm watching the SPX. Bulls (and investors who want the damage to stop, of course) want the SPX to begin producing those daily closes above 1456, but as long as it's not doing so, there's a potential downside target near 1350. Not all downside targets are met, of course.

Keene Little : 11/21/2007 9:24:52 AM

Have you noticed how difficult this market is making it for bears? Whether it's a morning spike or a late-day spike it seems the intent is to stop out the shorts. And then the overnight moves to the downside leaves a large gap down which is hard to short. This morning's gap down is going to leave a very bearish impression on the price patterns.

Linda Piazza : 11/21/2007 9:21:14 AM

The Federal Reserve has already announced a repo of $12.000 billion this morning, ahead of its typical release time. So far, that leaves a net drain of $22.250 billion, but when the Fed announces a repo this early, it also typically announces at least one more during the typical 9:40 time period.

Jane Fox : 11/21/2007 9:21:01 AM

Linda commented on the USDJPY currency pair and I would like to add to her commentary but in the context of how I look at the markets. This market has made the exact same pattern as the American markets overnight so it is corroborating the overnight move. The fact that USDJPY broke its PDL was due to the hours each market trades and does mean much here.

Moving on the $/Crude/Gold charts it is quite obvious the relationship between these three has not become unraveled yet. Link

Jane Fox : 11/21/2007 9:18:49 AM

LONDON (MarketWatch) -- Yields on 10-year Treasury notes (TNX) fell below 4% for the first time since September 2005 in early trading Wednesday, as investors flocked to safety with U.S. stock futures and international stock markets sharply lower. In more recent trades, yields were just over 4.01%, down from 4.05% on Tuesday.

Jane Fox : 11/21/2007 9:17:20 AM

NEW YORK (MarketWatch) -- Crude-oil futures edged higher early Wednesday, having touched a new record high overnight at $99.29, as traders awaited weekly data on petroleum inventories from the Energy Department due later in the session.

Crude oil for January delivery gained 27 cents at $98.30 a barrel in electronic trading on the New York Mercantile Exchange.

"U.S. dollar weakness boosted the contract above the $99 a-barrel threshold for the first time, but the gain was not sustained ahead of the Energy Information Administration's weekly inventory report later today," said analysts at Action Economics.

Jane Fox : 11/21/2007 9:01:48 AM

Lower lows and highs tell you the bears had control of the overnight markets although no previous day low was breached. Link

Jane Fox : 11/21/2007 8:59:06 AM

Once again it looks like the US$ is in the process of making a bottom (a bottom will form at sometime, we just don't know when). We have a double bottom forming but MACD is not making a double bottom it is making a higher low. RSI is also making a higher low although I did not show this on the chart.

IF the $ is indeed making a bottom this could have huge implications on Crude and Gold. Whether or not those two commodities fall in reaction to a rally in the $ is not something I care to speculate on because the relationship between these markets could certainly come unraveled once all the bulls and bears start to take up arms in each of the markets. Link

Jane Fox : 11/21/2007 8:50:34 AM

WASHINGTON (MarketWatch) -- First-time seasonally adjusted claims for state unemployment benefits fell in the latest week, the Labor Department reported Wednesday. The number of initial claims in the week ending Nov. 17 fell 11,000 to 330,000. Wall Street economists had expected claims to hit 330,000. Jobless claims in the previous week were revised to 341,000, compared with the initial estimate of a rise of 20,000 to 339,000. The four-week average of seasonally adjusted initial claims fell 750 to 329,750. Meanwhile, seasonally adjusted number of Americans receiving state jobless benefits increased 7,000 to 2.57 million in the week ending Nov. 10. The four-week seasonally adjusted moving average of continuing claims rose 10,750 to 2.57 million.

Linda Piazza : 11/21/2007 8:24:22 AM

As I type, the USDJPY is at 108.57 after reaching an overnight low of 108.24 a couple of hours ago, when neither the Nikkei 225 nor the U.S. markets were trading. This has taken the currency pair below figures shown for the August-September period in '05 and 109.00 low in '06, but it's also in the approximate range from which the currency pair bounced in those periods. My currency charts unfortunately do not go back to April of '05 to show what was happening then.

The correlation of currency action with U.S. equity action during those two periods I mentioned went this way, however: the currency pair led equities, heading lower before equities did and bouncing before they did, too. Lately, I haven't been so sure that the currency pair has always done as good a job of leading equities and has instead sometimes seemed to react with them or even be led by them, but the evidence remains that we should at least watch the currency pair's action for corroboration, even if we don't know if the yen carry trade and/or its implications for U.S. equities remains as intact as it once was. With the prospect of the yen strengthening, I don't know if the yen carry trade will figure as prominently in the future. However, for now, we should certainly watch this pair and watch in particular for signs that it will begin a stronger bounce or instead continue diving below the '06 low.

Linda Piazza : 11/21/2007 8:09:18 AM

$34.250 billion in repos mature today. I'll let you know later what the Federal Reserve decides to do.

Market Monitor Archives